Bluetooth-enabled mobile services threaten NFC with take-off

There is growing excitement around Bluetooth technology and how it can support mobile users’ real-world activities. Apple’s iBeacon and PayPal’s Beacon are just the tip of the iceberg, with many more Bluetooth-enabled services expected over the coming year.

IBeacon and Beacon both leverage Bluetooth Low Energy, which was introduced in 2010 and can be used to identify mobile users within a short range, similar to how near-field-communications works. While NFC was expected to become the dominant technology for enabling mobile users to interact with the real world, the tide seems to be shifting toward Bluetooth at the moment.

“When you have two big guys like PayPal and Apple backing Bluetooth, that’s a big plus for that technology as opposed to something like NFC, which has yet to really take off,” said Patrick Connolly, London-based senior analyst at ABI Research.

“What we are going to see next year is a huge amount of companies offering both the technology and the services around this, which will really help to drive adoption,” he said.

In-store applicationsIn addition to Apple and PayPal, many other companies have already or are planning to launch Bluetooth-enabled beacons over the coming months, some of them major technology companies, per Mr. Connolly.

As a result, these beacons are expected to become a big trend next year and will be deployed inside stores in various locations to detect handsets as they move through the store.

This will give retailers significant insights into how customers shop, what brand decisions they make and how they convert – exactly the kind of analytics that online retailers have been benefitting from for years but which have been missing from the real world.

Apple bets on Bluetooth Low Energy technology.

Apple’s i Beacon becomes available with iOS 7 and could support marketers’ efforts by enabling them to use Bluetooth to create a beacon around a specific area such as a store to communicate with app users once they enter the area. For example, marketers could send users of their apps coupons or information about in-store events.

PayPal’s new Beacon device allows consumers to check-in at stores without even touching their phones. Merchants that enable the PayPal Beacon technology will be able to let consumers pay completely hands-free as well as check-in to the store the moment they walk in.

Short-range detectionOne of the benefits of Bluetooth compared to NFC is that most handsets are Bluetooth-enabled while the same it not true for NFC. However, users still need to enable Bluetooth in their handsets, which many have not done.

As a result, the pool of users that Bluetooth services can reach is limited.

These new services leverage Bluetooth Low Energy technology, which has a dedicated location protocol enabling beacons to support location and proximity detection.

On the analytics side, BLE will enable retailers to aggregate anonymous data about shoppers in their stores.

PayPal's Beacon in action.

BLE is also likely to support the movement toward branded retailer apps for use inside stores. This is already apparent with apps from both Walmart and Target that can be used for in-store services.

Another benefit of Bluetooth is that it is a fairly accurate technology given that users need to be within range of a beacon for it to be detected.

As a result, retailers will be able to determine which aisle users are in and send them offers based on this information.

The Apple factorThe technology is also relatively low-cost to implement and has already been successfully deployed by a number for retailers for analytics.

One of the downsides to Bluetooth technology is that users need to scan for nearby Bluetooth devices and to authenticate them, which can be a lengthy process.

In comparison, because NFC is a much shorter range technology, it removes some of the obstacles around mistaken payments and verification is typically a shorter process.

This is one reason why NFC was expected to be the leading technology for mobile payments.

However, without the backing of major players such as Apple, NFC’s future is now in question.

“Apple has a huge impact on what does and does not take off in the mobile world, and it doesn’t seem to backing NFC,” Mr. Connolly said.

“NFC has a lot of benefits and was generally viewed as the technology that was going to take over the space and now there is this barrier for mass adoption,” he said.

Final TakeChantal Tode is associate editor on Mobile Marketer, New York